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In a unanimous 24-page opinion authored by newly seated Justice Cuellar and filed December 17, 2015, the California Supreme Court resolved a fundamental issue regarding CEQA’s scope, holding that – with certain specific statutory exceptions – it does not compel what many practitioners have referred to as a “CEQA-in-reverse” analysis. California Building Industry Association v. Bay Area Air Quality Management District (2015) ___ Cal.4th ____, 2015 WL ______, Case No. S213478.

Per the Court: “In light of CEQA’s text, statutory structure, and purpose, we conclude that agencies generally subject to CEQA are not required to analyze the impact of existing environmental conditions on a project’s future users or residents. But when a proposed project risks exacerbating those environmental hazards or conditions that already exist, an agency must analyze the potential impact of such hazards on future residents or users. In those specific instances, it is the project’s impact on the environment – and not the environment’simpact on the project – that compels an evaluation of how future residents or users could be affected by exacerbated conditions.” Notwithstanding “special CEQA requirements [that] apply to certain airport, school and housing construction projects[,]” the Court held “that ordinary CEQA analysis is concerned with a project’s impact on the environment, rather than with the environment’s impact on a projects and its users or residents.”

Key points of the California Supreme Court’s decision include:

It’s scope of review in interpreting CEQA is de novo, it aims to effectuate the Legislature’s intent, and it “intrepret[s] CEQA to afford the most thorough possible protection to the environment that fits reasonably within the scope of its text.” (Citing Laurel Heights Improvement Assn. v. Regents of University of California (1988) 47 Cal.3d 376, 390.)

The Court also affords “appropriate” deference to the interpretations of a statute made by the agency charged with its implementation (citing Yamaha Corp. of America v. State Bd. of Equalization (1998) 19 Cal.4th 1, 7), and per its prior CEQA precedents gives “great weight” to the CEQA Guidelines’ interpretations of CEQA as promulgated by the Resources Agency except where “clearly unauthorized or erroneous under the statute.”

The Court found that the validity of CEQA Guidelines § 15126.2(a), which “indicates that CEQA generally requires an evaluation of environmental conditions and hazards existing on a proposed project site if such conditions and hazards may cause substantial adverse impacts to future residents or users of the project[,]” turned on proper interpretation of Public Resources Code § 21083. That statute provides “a project may have a significant effect on the environment’” (§ 21083(b)) if “[t]he environmental effects of a project will cause substantial adverse effects on human beings, either directly or indirectly.” (§ 21083(b)(3).) While CEQA is thus concerned with public health and safety, the position of BAAQMD and the Resources Agency on this issue did not square with the statutory phrase “environmental effects of a project.”

Per the Court: “The statute does not provide enough of a basis to suggest that the term “environmental effects” as used in this context is meant, as a general matter, to encompass these broader considerations associated with the health and safety of a project’s future residents or users. Section 21060.5 defines “environment” as “the physical conditions which exist within the area which will be affected by a proposed project, including land, air, water, minerals, flora, fauna, noise, objects of historic or aesthetic significance.” (§ 21060.5.) Given the text of [Public Resources Code] section 21083 and other relevant provisions of the statutory scheme to which it belongs – including CEQA’s statute-wide definition of “environment” – the phrase in question is best interpreted as limited to those impacts on a project’s users or residents that arise from the project’s effects on the environment. Even if one reads into CEQA’s definition of “environment” a concern with people – a reading that, notwithstanding section 21060.5, is conceivable given the Legislature’s interest in public health and safety – section 21083 does not contain language directing agencies to analyze the environment’s effects on a project. Requiring such an evaluation in all circumstances would impermissibly expand the scope of CEQA.”

Following its analysis of various provisions of CEQA as supporting its conclusion as to the general rule, the Court stated that the expanded “kind of analysis that the Guidelines purport to require” would “all but elide[ ] the word “environmental” and “allow the phrase to encompass nearly any effect a project has on a resident or user.” Per the Court: “Given the sometimes costly nature of the analysis required under CEQA when an EIR is required such an expansion would tend to complicate a variety of residential, commercial, and other projects beyond what a fair reading of the statute would support.”

The Court upheld as a reasonable construction of CEQA certain portions (comprising two sentences) of the challenged Guidelines language “to the extent they call for evaluating a project’s potentially significant exacerbating effects on existing environmental hazards – effects that arise because the project brings “development and people into the area affected.” It stressed in this vein that: “Both CEQA and the Guideline call explicitly for an analysis of the project’s effects on the environment.”

To the extent the challenged Guideline went beyond requiring an analysis of a project’s “exacerbating” effect on existing environmental conditions, however, the Court held it to be invalid and unauthorized by CEQA, notwithstanding the deference owed to the Resource Agency’s expert, APA-promulgated interpretation: “[T]he remainder of the challenged portion of the Guidelines goes astray, imposing a requirement too far removed from evaluating a project’s impacts on the environment.” The Court thus invalidated the portions of § 15126.2(a) that read: “[A]n EIR on a subdivision astride an active fault line should identify as a significant effect the seismic hazard to future occupants of the subdivision. The subdivision would have the effect of attracting people to the location and exposing them to the hazards found there.”

In its opinion’s concluding several pages, the Supreme Court noted specific statutoryexceptions to the general rule it endorsed: “Although CEQA does not generally require an evaluation of the effects of existing hazards on future users of the proposed project, it calls for such an analysis in several specific contexts involving certain airport (§ 21096) and school construction projects (§ 21151.8), and some housing development projects (§§ 21159.21, subds. (f),(h), 21159.22, subds. (a),(b)(3), 21159.23, subd. (a)(2)(A), 21159.24, subd. (a)(1)(3), 21155.1, subd. (a)(4),(6).” However, the Court rejected BAAQMD’s argument that these specific and delimited exceptions supported a contrary general rule: “[W]e cannot … extrapolate from these statutes an overarching, general requirement that an agency analyze existing environmental conditions whenever they pose a risk to the future residents or users of a project.”

The Court noted its analysis was “not inconsistent” with four previously published court of appeal cases relied on by CBIA, “all of which implicitly held that CEQA does not generallyrequire an agency to analyze how existing hazards or conditions might impact a project’s users or residents.” Those decisions had no occasion to consider the specific exceptions to the general rule discussed in the Supreme Court’s opinion.

* * *

While it may eschew the phrase “CEQA in reverse,” the Supreme Court has nonetheless confirmed that CEQA does not (as a general matter, anyway) require analysis of the environment’s impact on the project. The Supreme Court’s decision resolved (as a matter of straightforward statutory interpretation) a fundamental issue regarding the general scope of CEQA analysis in a manner that should cause lead agencies and project developers to breathe a bit easier. However, certain important questions remain to be answered – including, most prominently, the proper scope of CEQA analysis in situations where specific statutes limit the availability of CEQA exemptions for certain housing development projects where future residents may be harmed by existing environmental conditions. As always, the story of CEQA is a work in progress that the Courts and Legislature continue to write.

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